Biden dropped a high-level summary of his tax proposals a few weeks ago. We want to break them down for you.
Top rate on ordinary income. Biden proposes increasing the current top tax rate of 37% to 39.6%. This will affect taxpayers who are single earning more than $520,000 per year, and married taxpayers earning more than $620,000 per year.
Long-term capital gains. Biden plans to increase the tax rate for long-term capital gains from 20% to 39.6% for taxpayers earning more than $1 million per year.
Payroll taxes. Currently, you pay Social Security (6.2%) and Medicare (1.45%) taxes on wages earned up to $137,700. Any wages in excess are only subject to Medicare taxes. Biden's plan will add Social Security taxes back to wages earned once they reach $400,000. If you earn $450,000, you'll see the Social Security and Medicare tax on your first $137,700 in earnings, just the Medicare tax of 1.45% on your earnings between $137,700 and $399,999, and then Social Security will come back in on that last $50,000 ($400,000 - $450,000).
Itemized deductions. Biden will reinstate the Pease Limitations which phases out itemized deductions for those earning more than $400,000 per year.
Stepped-up basis. Biden proposes to eliminate stepped up basis at death. This means heirs will inherit the deceased taxpayer's adjusted basis and will be subject to capital gain tax when the asset is sold.
1031 exchanges. Biden has discussed repealing 1031 exchanges to fund new tax cuts and credits for child and elderly care.
Tax cuts. Biden will implement a handful of tax cuts and credits aimed at low-income households and small businesses. Those include a credit for small businesses providing retirement plans to employees, a credit of $15,000 for first-time home buyers, a renter's credit to reduce rent and utilities expense, an expansion of the earned income and premium tax credit, and a credit for parents with childcare.
Want to read more? Check out this summary by the Tax Foundation: https://taxfoundation.org/joe-biden-tax-plan-2020/